What does a cash flow statement indicate?

A cash flow statement is a crucial financial document that reports the cash generated and spent during a specific period of time. It provides insights into a company's liquidity and overall cash position by detailing how cash flows in and out of the business. This statement is divided into three main sections: operating activities, investing activities, and financing activities, each of which reflects the cash flow specific to those areas.

By focusing on inflows and outflows, stakeholders can analyze how well a company manages its cash, ensuring that it can meet its obligations, reinvest in the business, and distribute earnings to shareholders. This is essential information for potential investors, creditors, and the management itself as they make decisions about operations and strategy.

The other options relate to different financial aspects. Company profits refer to net income, which can be influenced by non-cash items such as depreciation. Shareholder equity reflects the company's net assets but does not provide information on cash transactions. Total revenue generated by sales indicates the top line earnings but does not account for cash outflows or the timing of cash receipts, which are critical in understanding the actual cash position.